Geithner prompted a new round of dealmaking among
regulators, funds and banks when he used the 2010 Dodd-Frank Act
to force the issue back onto the SEC’s agenda.

The money-market mutual-fund industry, which provides
critical short-term financing for companies and financial firms,
pushed against the rules in the first round of talks and could
still be successful in derailing them, analysts said.

Securities and Exchange Commission Chairman Mary Schapiro
in August gave up on a plan to strengthen regulation of the
funds after three of the agency’s five commissioners told her
they opposed it. One of those commissioners, Daniel Gallagher,
said last week that he probably would vote for a new version.

Geithner’s move -- his first under new powers created by
Dodd-Frank -- puts the ball back in the SEC’s court. If the SEC
doesn’t pass new regulations, Geithner said in a letter Sept.
27, the council should use its Dodd-Frank authority to designate
activities of money market funds a systemic threat, effectively
ordering the agency to take action.

The Financial Stability Oversight Council also has the
authority to designate individual firms or their payment,
clearing and settlement activities as systemically important,
which would put them under heightened government supervision.

Geithner recommended that the SEC consider three steps to
reduce the risk funds might pose to the financial system:
floating net asset values, requiring funds to hold capital
buffers of “adequate size,” and imposing capital and enhanced
liquidity standards, possibly with redemption fees. The changes
are similar to those proposed by Schapiro.

The SEC is already laying the ground for compromise and
passage of a new plan. While the fund industry has been united
in its general opposition to Schapiro’s plan, individual
companies have staked out different positions on the options and
made varying overtures to the SEC on what new rules might be
acceptable.

For more, click here.

Compliance Policy

FSOC Moves Closer to Designating Firms Systemically Important

The Financial Stability Oversight Council voted Sept. 28 to
move closer to designating some non-bank financial companies as
systemically important, the U.S. Treasury Department said in a
statement. The Treasury didn’t name the companies or give the
number of firms it would put under heightened supervision by the
Federal Reserve.

The council, a group of regulators created to prevent
another financial crisis, “discussed a number of topics related
to domestic and global markets, including recent developments in
Europe,” according to the Treasury statement.

Compliance Action

CFTC Grants TrueEX Exchange Status to Offer Interest-Rate Swaps

The market, which expects to offer trading in interest-rate
swaps in the first quarter, is the first exchange approved after
passage of the Dodd-Frank Act in 2010, the CFTC said in a
statement Sept. 28 on its website. Hirani, 46, co-founded
Creditex Inc., a credit-swaps brokerage he sold to
Intercontinental Exchange Inc. in 2008 for $513 million.

Unlike exchanges in the futures market, trueEX will allow
users to send trades to the clearinghouse of their choice,
according to the statement. Exchange owners such as CME Group
Inc. and Intercontinental process futures with clearinghouses
they own. Under Dodd-Frank, exchanges or swap execution
facilities must offer investors the choice of where their
transactions are cleared.

U.S. Regulators Fines on Cotton Trading Limits Tops $2 Million

U.S. regulators imposed more than $2 million in fines this
week involving excessive speculation in the cotton market during
2010 and 2011, when prices more than tripled on their way to a
record high before plunging.

JPMorgan Chase Bank, a unit of JPMorgan Chase & Co., agreed
to pay a penalty of $600,000 and Australia & New Zealand Banking
Group Ltd. was also ordered to pay $350,000, the U.S. Commodity
Futures Trading Commission said Sept. 27 in separate statements.
On Sept. 25, the agency said Sheenson Investments Ltd. and its
founder Ge Weidong, based in Shanghai, China, agreed to pay $1.5
million.

ANZ, based in Melbourne, exceeded the cotton limit on one
day in February 2011 and those for wheat on the Chicago Board of
Trade in August 2010, the CFTC said.

JPMorgan declined to comment through Jennifer Zuccarelli, a
spokeswoman in New York.

“These breaches of CFTC regulations were inadvertent,
technical in nature and confined to a small number of
transactions,” ANZ Chief Risk Officer Nigel Williams said in an
e-mailed statement. “Ensuring we are compliant with regulations
is a key priority in every part of ANZ.”

Sheenson Investments agreed to pay a “disgorgement” fine
of $1 million for ill-gotten gains and a $500,000 civil penalty
to settle the charges that they exceeded speculative position
limits in soybean-oil and cotton futures, the CFTC said in a
Sept. 25 statement. Calls to Sheenson from Bloomberg in Shanghai
were not answered.

Ex-Cantor Fitzgerald Traders Lose Market-Abuse Penalty Case

Two former traders at Cantor Fitzgerald LP’s London unit
and a Swiss fund manager lost a case against the U.K. finance
regulator over disciplinary penalties for committing market
abuse.

Stefan Chaligne, an equity-fund investment manager,
instructed Cheickh Tidiane Diallo and Patrick Sejean at Cantor
Fitzgerald to trade on his behalf with the goal of driving up
the share prices for certain companies. He must pay a 900,000-pound ($1.46 million) fine and 362,950 euros ($469,548)
disgorgement, a London-based financial tribunal ruled Sept. 28.
He is also banned from working in the U.K. finance industry.

Sejean must pay a 650,000-pound fine the tribunal ruled,
100,000 pounds more than the one the FSA first sought to impose.
He was also banned from working in the industry.

A ban against Diallo, who had maintained that a ban was too
severe, was also upheld.

Chaligne, a French citizen who lives in Switzerland,
requested trades through Cantor Fitzgerald on Dec. 31, 2007, and
Jan. 31, 2008, according to the Financial Services Authority.

He traded in eight stocks and American Depositary Receipts
valued at about 5 million pounds on European and North American
stock exchanges in 2007, giving instructions to Diallo and
Sejean “to make the prices of all the stocks as high as
possible on the close,” the regulator said.

Chaligne said he has asked that the disgorgement part of
the fine be paid to his investors.

For more, click here.

Huhtamaki and 12 Packaging Firms Sent EU Antitrust Objections

Huhtamaki Oyj and 12 other makers of food packaging were
sent statements of objections by European Union antitrust
regulators over a suspected cartel.

The European Commission sent its formal list of objections
to manufacturers or distributors of polystyrene foam trays and
polypropylene rigid trays used to package fish, meat or cheese
in the retail industry, it said in a statement Sept. 28.
Regulators can fine companies up to 10 percent of yearly sales
for agreeing to fix prices. The commission has concerns about
possible price fixing, market sharing and customer allocation,
it said in the statement. It didn’t name the companies.

Huhtamaki said the EU informed it of alleged
anticompetitive behavior in southwest Europe, northwest Europe
and France for 2000-2009. Most of its operations in this
industry were shut down or sold off between 2006 and 2010, it
said in a statement.

Eco-Bat Says It’s Cooperating With EU on Lead Investigation

Eco-Bat Technologies Ltd., the Matlock, England-based lead
producer, said it’s cooperating with a European Commission
investigation into prices paid for used batteries and lead scrap
by “certain industry participants.”

Eco-Bat and some subsidiaries are included in the
investigation, Ian Davies, group finance director at Eco-Bat,
said in an e-mail Sept. 28. He said Eco-Bat won’t comment
further. An e-mail to the competition area of the commission
wasn’t immediately returned after business hours.

Courts

U.S. Court Blocks Dodd-Frank Curbs on Derivatives Speculation

U.S. efforts to curb speculative derivatives trading in the
wake of the 2008 financial crisis were blocked by a federal
judge, who ruled that regulators botched the process used to put
new limits in place.

Less than two weeks before curbs were set to take effect,
U.S. District Judge Robert Wilkins in Washington ruled that the
2010 Dodd-Frank Act required more study before setting caps on
positions in oil, natural gas, wheat and other commodities. The
Commodity Futures Trading Commission failed to first assess if
the rule, slated to take effect Oct. 12, was necessary and
appropriate under the law, the judge ruled Sept. 28.

The lawsuit, filed in federal court in December by the
Securities Industry and Financial Markets Association and the
International Swaps and Derivatives Association Inc., was part
of the financial industry’s efforts to challenge Dodd-Frank, the
law enacted following the 2008 credit crisis. The associations
represent JPMorgan Chase & Co., Goldman Sachs Group Inc., Morgan
Stanley and other banks and energy trading firms.

The so-called position limits rule spurred more than 13,000
public comments from supporters such as Delta Air Lines Inc. and
opponents including Barclays Plc.

After the ruling, Gary Gensler, CFTC chairman, said in a
statement, “I believe it is critically important that these
position limits be established as Congress required,” adding
that “we are considering ways to proceed.”

The commission estimated that the limits would affect 85
energy trading firms, 12 metals traders and 84 traders of
certain agricultural contracts. The agency could decide to
appeal the decision or try to pass a new rule limiting
positions.

Ken Bentsen, executive vice president at Sifma, described
the ruling as “a win for all market participants in the economy
when regulators have to follow the law clearly and do the
economic analysis Congress has deemed is necessary.”

For more, click here.

Ex-SAC Analyst Horvath Pleads Guilty in Insider Case

Jon Horvath, a former technology analyst at a unit of
Steven Cohen’s $14 billion hedge fund SAC Capital Advisors LP,
pleaded guilty to passing nonpublic information to his portfolio
manager, who traded on the tips.

Horvath, 42, pleaded guilty Sept. 28 before U.S. District
Judge Richard Sullivan in Manhattan to one count of conspiracy
to commit securities fraud and two counts of securities fraud.
The judge said Horvath, who is cooperating with the U.S. probe
and may testify, faces a maximum of 45 years in prison.

The plea came days after it was revealed that Michael
Steinberg, a hedge fund manager at SAC Capital’s Sigma Capital
Management Ltd. and Horvath’s former supervisor, is an
unindicted co-conspirator in the $62 million insider trading
scheme tied to technology stocks, two people familiar with the
matter said.

In his guilty plea, Horvath said that after obtaining
nonpublic information on Dell Inc. and Nvidia Corp., he
“provided the information to the portfolio manager I worked for
and we executed trades,” on the information. Horvath didn’t
name Steinberg in his plea.

The case is U.S. v. Newman, 12-00124, U.S. District Court,
Southern District of New York (Manhattan).